MPEL 3Q REPORT CARD

Takeaway: If you like Macau as we do you have to like MPEL. While the stock could consolidate over the near-term, we'd be looking for entry points

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 

OVERALL

  • BETTER:  Overall EBITDA beat the Street and our expectations.  While hold was high, luck adjusted EBITDA was right in-line with our adjusted EBITDA estimate.  The outlook is bright and management ws very optimistic about Macau's near-term performance.

TABLE OPTIMIZATION 

  • BETTER:  COD had significantly improved table yields compared with prior quarter.  MPEL sees further upside on table productivity.
  • PREVIOUSLY: "Our rolling chip segment continues to be impacted by our table optimization strategy. This strategy has resulted in further tables being shifted from Altira to City of Dreams, as well as the movement of some tables from VIP to mass during the second quarter of 2012. While somewhat disruptive as it is happening, this initiative should set us up favorably going forward."

HIGH-END MASS MARKET

  • SAME: Despite supply additions (SCC), MPEL's mass table games segment grew 30% YoY.
  • PREVIOUSLY:  "The market-wide mass market table game segment continues to demonstrate strong year-over-year growth, expanding over 33% during the second quarter of 2012. This once again reinforces our mass market focus strategy, particularly at the higher end of the market, which we believe will provide a more stable, loyal, and profitable customer base for the foreseeable future."

STUDIO CITY

  • SAME:  They have entered the syndication stage of their financing for MSC and are also contemplating a high yield financing once the bank debt closes.
  • PREVIOUSLY:  "So again, we're very confident to have gaming as part of this exciting, integrated resort. And I would like reemphasize that after the land grant stage, whether it's us or any of our competitors, we are going down the same route in terms of applying for gaming or gaming tables."

COD MASS HOLD RATE

  • SAME:  3Q mass hold rate came in at 27.4%.  MPEL reiterates mass hold guidance of 25-30%.
  • PREVIOUSLY:  "We said 25% to 30%, and we're quite confident in COD will be very, very high end of that range going forward because of our enhancement of the efficiency on the floor during the last few quarters."

5TH TOWER (PHASE 3) AT COD

  • SAME:  It is a 1.5 million sq ft development (50% larger than Altira).  They are waiting for government approval but hope to start construction on the project by mid-2013. 
  • PREVIOUSLY:  "We are short of rooms at City of Dreams, and tower five has always been in the plan. And given our strength in mass and also the fact that we do need more rooms going forward; we're at 90% plus occupancy every single day of the year not just on weekends. We have completed all of our conceptual designs for that tower. And I can assure you, when it's built, it's going to be the ultimate art piece in Macau....again, it's subject to the government processes because this started as a apartment hotel in the early days, so we do need to have the land re-gazetted. But as soon as that is done, we would like to begin construction of that as early as next year."

VIP

  • BETTER:  There has been no pressure on credit and liquidity remains healthy. MPEL sees some business improvement compared with the past couple of months.
  • PREVIOUSLY:  "We've really spent our time and effort into improving the product of our VIP, knowing that there's been disruption. Inevitably when you renovate a VIP room, you will disrupt the business there. We have to close off sections of it. And I think that's why, on top of the general market trends, you are seeing some slowdown in terms of some of our VIP business."

ALTIRA EBITDA

  • SAME:  Business has stabilized but expect continued improvement in the quarters ahead.  Hold-adjusted EBITDA was $36 million.
  • PREVIOUSLY:  "So with the current run rate, I think we will see some continuous improvement in the EBITDA generated by this property going forward."

MPEL 3Q REPORT CARD - mpel2


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